Senate CLARITY Act Faces 100+ Amendments as Stablecoin Rewards Battle Intensifies

CLARITY Act Markup Approaches with 100+ Amendments

The Senate Banking Committee’s CLARITY Act, a long-delayed bill aimed at structuring the crypto market, is entering markup with more than 100 proposed amendments. While the final count has not been formally confirmed, the current proposal places the number in line with January’s effort, when 137 amendments were submitted before a committee vote was scrapped. This surge in amendments underscores the persistent divisions over the bill’s provisions, even after extensive negotiations.

Stablecoin Rewards Emerge as Key Battleground

The most consequential debate centers on stablecoin rewards, a sticking point that previously stalled negotiations and threatens to reignite tensions between crypto firms and traditional banks. The Senate’s compromise proposal would prohibit rewards on idle stablecoin holdings if they resemble interest on bank deposits. However, it would still permit incentives tied to active stablecoin use, such as payments or transactions. This distinction aims to prevent stablecoins from becoming deposit substitutes while allowing firms to reward engagement rather than passive balances.

Banks Push for Stricter Restrictions

Banks argue that the current language does not go far enough. Their primary concern is that crypto exchanges and intermediaries could structure rewards around stablecoin activity in ways that divert deposits from insured banks. Banking groups have urged senators to close what they view as a loophole, preventing stablecoin issuers or affiliates from offering yield-like incentives that compete with traditional bank accounts.

Sens. Jack Reed and Tina Smith have reportedly filed an amendment to tighten these standards. Their proposal targets rewards that are “substantially similar” to deposit interest, a formulation that could give regulators broader authority to block incentive programs banks consider functionally equivalent to yield. This amendment is poised to become a pivotal vote during the markup, with support signaling alignment with the banking industry’s stance and opposition preserving the compromise led by Sen. Thom Tillis.

Intense Lobbying Campaign Surrounds Stablecoin Rewards

The debate has sparked an unusually visible lobbying campaign. Stand With Crypto, the advocacy group backed by Coinbase, reported that banking lobbyists sent 8,000 letters opposing stablecoin rewards. The group also stated that its advocates made 8,000 calls and sent 300,000 emails to lawmakers in recent months, with supporters contacting legislators nearly 1.5 million times in favor of the CLARITY Act.

Meanwhile, traditional finance leaders are doubling down on their efforts to ensure the amendment’s success. Lorrie Trogden, president and CEO of the Arkansas Bankers Association, recently issued a public call to action on X (formerly Twitter), urging banking industry members to voice their concerns ahead of the Thursday markup.

Battle Over Stablecoin Rewards Reflects Broader Payment System Divide

These efforts highlight how a technical debate over reward language has evolved into a proxy fight over whether banks or crypto platforms will dominate the next layer of dollar-based payments. The outcome of the markup could set a precedent for the future regulation of stablecoins and their role in the financial system.